Terrorists shelled Sderot and Gush Katif Saturday night at the same
hour Defense Minister Shaul Mofaz talked with Gaza strongman Mohamed
Dahlan on ceding more authority to the PA.

One of three mortar shells that exploded in Netzer Hazani severely
damaged a house. No was injured. Terrorists also shot an anti-tank
missile Friday night in nearby Neve Dekalim, also causing damage but
no injuries. Both towns are in Gush Katif in southern Gaza.

Terrorists also fired a Kassam rocket which exploded in an open field
near Sderot in the western Negev.

Saturday night´s discussions in Tel Aviv with Dahlan were the first
time in more than a year Israeli officials have talked with Dahlan,
often considered the most powerful politician in Gaza. The talks are
based on the Israeli government strategy to "respond with quiet where
there is quiet." Chief of Staff Moshe (Bogie) Ya´alon ordered on
Friday that troops halt all operations in Gaza. Commanders are
prohibited from any offensive action without his approval. Israeli
soldiers still are deployed on main roads leading to Jewish
communities. Lt. Gen Ya´alon also said Israel will open all three
major Gaza crossings this week, all of which have been the scene of
terrorist attacks.

Both Palestinian Authority (PA) and Israeli media also reported that
Prime Minister Ariel Sharon will meet PA president Mahmoud Abbas (Abu
Mazen) the second week of February. The PA wants Israel to announce a
formal cease fire and release a large number of prisoners.

Israel has demanded but not received a ceasefire declaration from
Hamas and other self-declared terrorist groups. The terrorists have
insisted that Israel release prisoners and move soldiers out of Gaza
before they will commit to a "cooling off" period.

After a week of occasional mortar shelling, Arab terrorists exploded
five shells on Friday and another three Saturday night on Gush Katif
communities. Israel already has allowed isolated shelling, and the
weekend attacks were the first time that terrorists tested Israel
with a massive attack since Abu Mazen´s reduced the violence. Neither
Israeli politicians nor defense officials commented on the shelling
and rocket fire.

The government is in a flurry of diplomatic activity, with Sharon
advisor Dov Weissglas scheduled to Washington this week to meet with
the new Secretary of State Condoleezza Rice.